PH will only have 6 digital banks for now — Diokno
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Monday, Oct. 4, that only six digital banks are authorized to operate after all following the cancellation of the seventh slot for neobanks due to non-complying applicants.
“We approved six digital banks and it will remain six because the seventh slot –which was supposed to be competed among the nine additional applicants — failed to submit the complete documentation for the request. So, we will keep it at six,” said Diokno in a forum organized by the Financial Executives Institute of the Philippines (FINEX).
With only six neobanks, the BSP chief said they will be able to closely monitor the development of the digital bank market and make sure that there is healthy competition among the digital banks and the existing traditional banks.
The BSP has stopped receiving applications for digital bank license last Aug. 31. Prior to the announcement, there were two applicants in and one of these were approved as the sixth digital bank while the other applicant withdrew its application. After the BSP made the announcement of the Aug. 31 cut-off date, there were nine applicants that beat the deadline. These applications apparently have deficiencies in documentary or licensing criteria.
According to BSP Deputy Governor Chuchi G. Fonacier, “the nine additional applications were received prior to the Aug. 31 deadline. However, all nine applicants were not able to comply with the documentary requirements. So, a total of six digital bank licenses were granted by the Monetary Board.”
Originally, the BSP said they will approve only seven digital bank licenses and the limit will be implemented for three years or until end Dec. 2024, based on a memo that Diokno signed on Aug.19, following a Monetary Board resolution to close the application window for new digital banks last Aug. 12.
Fonacier said the remaining neobank applicants failed to submit to the BSP documentary and other pre-qualification requirements. “They were not able to comply with complete documentary requirements,” she said in a text message on Monday.
For now, there are only six digital banks approved to operate in the Philippines. These are Overseas Filipino Bank (OF Bank) of Land Bank of the Philippines (its license was approved on March 25, 2021); Tonik Bank of Singapore (June 3); UNObank of Singapore (June 3); UnionDigital of Union Bank of the Philippines (July 15): GOtyme of Robinsons Bank Corp. (Aug. 12); and Maya Bank, owned by PayMaya of PLDT Inc. (Sept. 16).
Of the six, only OF Bank and Tonik Bank are already operating as digital banks while the rest are expected to fully set up their operations within six months or less.
“We’ll give them three years to operate but some are really ready and they have huge networks (and some) will be online pretty soon, maybe in less than six months,” said Diokno in the FINEX forum.
“As you know, digital banking is different from the traditional banking, we only require them to have one headquarter, no branches, no light branches even, and so they will be operating at lower costs (and) adopting new technology,” he added.
The approved digital banks are given a year to complete pre-operating requirements and commence banking operations. Existing banks converting to digital banks should complete the transition within three years from date of acquiring a Monetary Board approval.
The BSP is limiting the number of digital banks to allow them the space to closely monitor the performance and impact of digital banks to the banking system and their contribution to the financial inclusion agenda. Diokno has said that BSP needs to ensure that there is healthy competition among banks to encourage the development of innovative and competitive financial products and services.
Digital banks, which are required at least P1 billion capitalization, have minimal or zero-reliance on physical touchpoints but will have to set up one office as central hub in the Philippines to receive and resolve customer complaints.
The BSP issued Circular No. 1105 last Dec. 2020 on the establishment of digital banks. It is the BSP’s seventh bank category.
Diokno said last week that BSP could reopen the window for digital bank license applications anytime or even within a year if they have assessed that the digital bank market needs to expand.